Omaha food manufacturing giant ConAgra Foods has been sued by a California snack company that says it has been frozen out of its share of the market for peanut butter-stuffed pretzel treats.
Maxim Marketing Corp. filed the suit this week in Los Angeles County Superior Court, seeking $60 million in damages for breach of contract, plus additional amounts not specified.
The suit says ConAgra and California-based grocer Trader Joe's conspired to cut Maxim out of the picture when it came to peanut butter-stuffed pretzel sales, to divvy up the extra profits for themselves.
The suit alleges breach of contract and other commercial behavior Maxim alleges to be improper after ConAgra bypassed Maxim's distribution, selling directly to Trader Joe's. The suit says that violated earlier agreements.
ConAgra, employer of about 3,300 in the metro area, said it plans to fight the suit, which it said is without merit.
“Our long-standing commitment to operating our business in a responsible way means that our customers and consumers can feel good about the high-quality food we make,” spokeswoman Becky Niiya said in an emailed response to an inquiry.
Trader Joe’s said it would not comment on pending litigation.
The tussle is over bite-size pretzel snacks that enrobe a dollop of peanut butter. Maxim's suit says the company developed the peanut butter-filled pretzel snack in 1988. That's when the company said it began paying a food manufacturer to make the snack, reserving the right of sale to retailers for itself.
Things began to change in 2011. That's when ConAgra, the suit says, bought the company that Maxim hired to make the snacks. Last year, the suit says, ConAgra said it would stop making the pretzels for Maxim, and Trader Joe's said it would stop buying them.
Shortly thereafter, according to the suit, identical pretzels in identical packages began showing up on Trader Joe's shelves — made by ConAgra.
“Pursuant to the parties' implied-in-fact contract, Maxim and ConAgra agreed and understood that ConAgra, as the contract manufacturer, would not attempt to undercut Maxim's business relationship with its customers by selling peanut butter-filled pocket pretzels or other related pretzel products directly to Maxim's customers, such as Trader Joe's,” the suit says.
Maxim said in the suit it sold about $10 million of the snacks to the chain in the last year the two did business together. If eliminating Maxim reduced costs by cutting out a middleman, the suit says, consumers have not been the ones seeing the benefits.
“Both Trader Joe's and ConAgra increased their profits on peanut butter-filled pocket pretzels, but without reducing the price of peanut butter-filled pocket pretzels to the consumers at Trader Joe's,” the suit says. “The consumer still pays $3.79 for peanut butter-filled pocket pretzels. Now that Maxim has been eliminated, defendants have increased their profits from the sale of peanut butter-filled pocket pretzels.”